Mother in Law Moving in, whats the options.
Discussion
We have recently moved to a larger house, bigger mortgage etc with a view to the mother in law moving in which now looks to be happening soon.
She currently has her own house with no mortgage, recently done up but needs a little tidying. What are our options, she is happy to sell the house give us the cash to make improvements for her and pay off some of the outstanding mortgage. The other thing we ware thinking about is to rent it out and use the cash to pay the monthly payments and over pay where possible to reduce the term and still have a valuable asset. Obviously we want to protect our self's and her for any future costs like care home costs ect, the house value is currently below the IHT limit.
She currently has her own house with no mortgage, recently done up but needs a little tidying. What are our options, she is happy to sell the house give us the cash to make improvements for her and pay off some of the outstanding mortgage. The other thing we ware thinking about is to rent it out and use the cash to pay the monthly payments and over pay where possible to reduce the term and still have a valuable asset. Obviously we want to protect our self's and her for any future costs like care home costs ect, the house value is currently below the IHT limit.
p1doc said:
brave man is all i am going to say lol
seriously worth getting proper financial advice to cover yourself and mother in law in case fall out or needs care soon as council could expect you to pay costs for care from money you have got
martin
We are getting financial and legal advise to try and cover all eventualities (or as many as possible)seriously worth getting proper financial advice to cover yourself and mother in law in case fall out or needs care soon as council could expect you to pay costs for care from money you have got
martin
Just thinking lots of people must have been in this very situation before.
If she rents out her old home, she will pay tax on the annual rental income.
If she sells her former home within 18 months of moving out, she will have no Capital Gains Tax liability on the sale so the entire sales proceeds will be hers to invest as she sees fit. In fact, because she can make use of her Annual Capital Gains Tax limit of (currently) £11,000, she could sell it a bit after the 18 month (free" period and still make a gain but offset her £11,000 allowance against the gain.
When she moves in, are you expecting her to "pay" anything towards her living costs in the house i.e. any sort of rent or lodgings?
I presume she is has no husband or partner?
If she sells her former home within 18 months of moving out, she will have no Capital Gains Tax liability on the sale so the entire sales proceeds will be hers to invest as she sees fit. In fact, because she can make use of her Annual Capital Gains Tax limit of (currently) £11,000, she could sell it a bit after the 18 month (free" period and still make a gain but offset her £11,000 allowance against the gain.
When she moves in, are you expecting her to "pay" anything towards her living costs in the house i.e. any sort of rent or lodgings?
I presume she is has no husband or partner?
Eric Mc said:
If she rents out her old home, she will pay tax on the annual rental income.
If she sells her former home within 18 months of moving out, she will have no Capital Gains Tax liability on the sale so the entire sales proceeds will be hers to invest as she sees fit. In fact, because she can make use of her Annual Capital Gains Tax limit of (currently) £11,000, she could sell it a bit after the 18 month (free" period and still make a gain but offset her £11,000 allowance against the gain.
When she moves in, are you expecting her to "pay" anything towards her living costs in the house i.e. any sort of rent or lodgings?
I presume she is has no husband or partner?
Yes we would be expecting her to pay her way towards our out going bills I suppose in a kind of informal rent. Her husband died a few years back and my partner is her only surviving child.If she sells her former home within 18 months of moving out, she will have no Capital Gains Tax liability on the sale so the entire sales proceeds will be hers to invest as she sees fit. In fact, because she can make use of her Annual Capital Gains Tax limit of (currently) £11,000, she could sell it a bit after the 18 month (free" period and still make a gain but offset her £11,000 allowance against the gain.
When she moves in, are you expecting her to "pay" anything towards her living costs in the house i.e. any sort of rent or lodgings?
I presume she is has no husband or partner?
You can rent her a room in your house tax free:
https://www.gov.uk/rent-room-in-your-home/the-rent...
https://www.gov.uk/rent-room-in-your-home/the-rent...
was8v said:
You can rent her a room in your house tax free:
https://www.gov.uk/rent-room-in-your-home/the-rent...
That has been mentioned by some accounting family members, also my partner could 'buy' her house from her using a 'loan' from her mother which would be paid back by her house being rented which she would then use to pay us for rent a room, thus giving us rental income and securing the property for my partner.https://www.gov.uk/rent-room-in-your-home/the-rent...
ATG said:
Vocal Minority said:
It would be based on the amount the property sold for, as that would be the time the Capital Gain materialised.
Yes, but you need to calculate by how much the value has changed. I'm asking how the start value is determined, not the end value.Start value will either be what the property was purchased for (if it ever becomes subject to CGT) or what ever the value was on 31 March 1982 - which was when CGT was 'rebased'. Whichever has occurred later.
markys said:
also my partner could 'buy' her house from her using a 'loan' from her mother which would be paid back by her house being rented which she would then use to pay us for rent a room, thus giving us rental income and securing the property for my partner.
I'm pretty sure that won't achieve anything.Sales "with reservation to title" holds no water with HMRC.
You do need to realise that this lady is not legally your "mother in law" in that she is the mother of your "partner" and not the mother of your wife. She technically has no familial or legal relationship with you personally at all.
Vocal Minority said:
Oh I see, sorry.
Start value will either be what the property was purchased for (if it ever becomes subject to CGT) or what ever the value was on 31 March 1982 - which was when CGT was 'rebased'. Whichever has occurred later.
Blimey. So if you fail to sell the house within the 18 month window, you don't just cease to gain protection from any further increase in value, you retrospectively lose the protection back to date of purchase/ 31 March 82?? Wow. That seems pretty unreasonable. Good info. Thanks! Start value will either be what the property was purchased for (if it ever becomes subject to CGT) or what ever the value was on 31 March 1982 - which was when CGT was 'rebased'. Whichever has occurred later.
Valuations are used for specific purposes in CGT. Valuations can sometimes be used to establish the "cost" of the asset or sometimes the "sale value" of the asset.
In a simple world, CGT is based on the ACTUAL sale proceeds minus the ACTUAL cost. The difference is the gain and tax will be charged on that gain.
Of course, life or tax is never as simple as that.
If the asset was bought many years ago (which effectively means before 31 March 1982), then the market value of the asset as it was at 31 March 1982 is used instead of the original cost. This usually works in favour of the taxpayer because most houses were worth more on 31 March 1982 than they would have cost the buyer originally - so using the 31 March 1982 valuation gives you a higher "cost" value and therefore less of a gain.
Sometimes a house is transferred between two parties and no actual sale for actual "cash" takes place. If that is so, it is not obvious what the sale proceeds on disposal really were. If this type of situation occurs, then the sale value will be worked out with reference to the market value of the property on the date of disposal.
This can have a detrimental impact on the person disposing of the property because they might end up with a Capital Gains Tax bill, but, because no cash changed hands, they may find it difficult to pay this tax bill.
Also, when market value is used to establish the "sale" price, there is no guarantee that HMRC will. agree with the value used. If they think the value should be higher, they will appoint the District Valuer to carry out a valuation on their behalf to see if the Market Value should be higher than the amount declared by the seller.
In a simple world, CGT is based on the ACTUAL sale proceeds minus the ACTUAL cost. The difference is the gain and tax will be charged on that gain.
Of course, life or tax is never as simple as that.
If the asset was bought many years ago (which effectively means before 31 March 1982), then the market value of the asset as it was at 31 March 1982 is used instead of the original cost. This usually works in favour of the taxpayer because most houses were worth more on 31 March 1982 than they would have cost the buyer originally - so using the 31 March 1982 valuation gives you a higher "cost" value and therefore less of a gain.
Sometimes a house is transferred between two parties and no actual sale for actual "cash" takes place. If that is so, it is not obvious what the sale proceeds on disposal really were. If this type of situation occurs, then the sale value will be worked out with reference to the market value of the property on the date of disposal.
This can have a detrimental impact on the person disposing of the property because they might end up with a Capital Gains Tax bill, but, because no cash changed hands, they may find it difficult to pay this tax bill.
Also, when market value is used to establish the "sale" price, there is no guarantee that HMRC will. agree with the value used. If they think the value should be higher, they will appoint the District Valuer to carry out a valuation on their behalf to see if the Market Value should be higher than the amount declared by the seller.
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